The research showed that, on average, landlords’ loan-to-value (LTV) across a portfolio stands at 37%, down 2% from last quarter.
The industry standard maximum loan-to-value is 85% and, while there has been some degree of ‘creep’ whereby some lenders will go to higher LTVs, a ‘cushion’ is built into the amount an investor is permitted to borrow. However, both professional and small scale landlords are gearing their overall portfolios at less than half the maximum allowed by criteria.
John Heron, managing director of Paragon Mortgages, commented: “Some have suggested that the succession of interest rate rises since last summer will leave property investors in financial difficulty. This is not the case. For us, the average LTV at inception is less than industry standard, at around 78%. However, the overall gearing across the typical landlord’s portfolio is considerably lower than this – as this research shows. Landlords are well placed to take the further expected rate rise in their stride.
"In addition, 70% of all our new buy-to-let loans taken out in recent months have been on a fixed rate. Financial advisers, and landlords themselves, are aware of the need not to expose themselves unduly. Contrary to the hype, landlords are now even better placed financially than they have been for 15 months.”
